Townsend played two games for the Suns this season after joining the club 12 months ago following his departure from Essendon.
The 28-year-old made his debut in the Giants' inaugural AFL match in Round 1, 2012, playing 28 games in the orange and charcoal before moving to Punt Road ahead of the 2016 season.
While the Suns will consider offering Townsend a lifeline via next month's Rookie Draft, Towey won't be offered a new contract for next year.
The 22-year-old, who joined Gold Coast in 2019, will venture back to his home nation of Ireland after not appearing for the Suns at AFL level.
The defender was a prominent feature in the club's reserves side, who competed in the new-look VFL competition in 2021.
Suns' player talent and strategy boss Craig Cameron stated his appreciation for Towey's services to the club.
“It hasn’t been an easy two seasons of AFL football, particularly for someone brand new to learning the game like Luke has,” Cameron said in a club statement.
“We want to commend him for his attitude and dedication to the SUNS over the last two years and wish him all the best for what lies ahead.”